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Of course the most famous warning about the power of the military came from Dwight D. Eisenhower, who commanded the Allied forces in Europe during World War II and went on to serve as president of the United States from 1953 to 1961. On his last day in office, he gave a televised farewell address to the nation in which he noted that “our military organization today bears little relation to that known of any of my predecessors in peacetime, or indeed, by the fighting men of World War II or Korea.”…

“We have been compelled to create a permanent armaments industry of vast proportions. Added to this, three and a half million men and women are directly engaged in the defense establishment. We annually spend on military security alone more than the net income of all United States corporations.”

“Now this conjunction of an immense military establishment,” Eisenhower continued, “and a large arms industry is new in the American experience. The total influence — economic, political, even spiritual — is felt in every city, every statehouse, every office of the federal government.”…

“In the councils of government,” the president warned, “we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist. We must never let the weight of this combination endanger our liberties or democratic processes.”

What provoked President Eisenhower to issue this stern warning to the nation? Most historians even find the speech to be mysterious. We will look at this later in this book so you’ll know the full story that only a few now know. First, though, we need to ask ourselves: What did Ike exactly mean by a “military-industrial complex?” He was the first person to ever use this term and it has stuck in the national consciousness ever since.

A key component of his speech is the word “new.” Today we don’t even think much about the fact that the United States has the most powerful military in the world, with bases spread across the planet and a large portion of its federal budget devoted to military spending. In 2010, at $687 billion, military spending made up 4.9 percent of the GDP of the United States. In comparison, Russia spent just over fifty billion dollars. But it’s bigger than that. You see, the US military budget accounts for approximately 40 percent of total global arms spending and is over six times larger than the military budget of China, and is greater than the next twenty largest military spenders combined. Today over one million Americans serve in the armed forces. Perhaps these figures do not surprise you, because if you are like most readers of this book, huge military spending for the United States has always been a fact of life since the day you were born. That’s why most don’t even give it a second thought.

But this was not the case for President Eisenhower and the people of his generation. Before World War II, the United States never had a permanent arms industry. Yes, it fought big wars….

But after major wars, the country always demobilized its forces. That is, until World War II….

The Internal Revenue Service was not a part of most people’s lives before the war.

You see, before the war only the wealthiest of Americans and corporations paid a dime of income tax. Between World War I and World War II the number of households paying income tax in any given year ranged from 1.25 to 2.5 percent. In 1939, 93 percent of the labor force paid no federal income tax at all….

President Truman gave a speech to a joint session of Congress on March 12, 1947, in which he laid out his “Truman Doctrine.” He said that it would now be the policy of the United States to “support free peoples who are resisting attempted subjugation by armed minorities or by outside pressures.” …

On August 29, 1949, the Soviets successfully exploded an atomic bomb of their own. The American people weren’t alarmed. A poll taken five days later showed that only 5 percent thought that atomic weapons were the most important issue facing the country. But, nevertheless, Harry Truman ordered a reappraisal of national security policy. Completed on April 14, 1950, this report, titled National Security Council Report 68 (NSC-68), became one of the most important documents of the Cold War. It set the stage for a massive arms race and advocated intervention throughout the entire world….

During World War II, the United States had been transformed into a war state with an economy centered around the military-industrial complex. NSC-68 made this all permanent. By 1953, three-fourths of the entire federal budget became earmarked to national security programs. Defense spending came to equal 18 percent of the nation’s entire gross national product and a full one third of the country’s business activity. In the first two decades of the Cold War, the country put 60 percent of its federal budget into defense spending….

NSC-68 turned the role of the United States in the world into something akin to a global empire backed by a massive military buildup and a war state….

The logic of global Cold War, though, drew the United States into behaving like an imperial world power….

NSC-68 dictated that world “order” be a new objective of the United States for it to not only wish for but to actively pursue. To do so, the federal government had to go beyond the Constitution and into behaviors such as assassination, coups, sabotage, subversion, and false-flag operations covered by concepts such as plausible deniability outside the normal system of checks and balances or any sort of real congressional oversight.…

In order to justify this unprecedented course for the United States, NSC-68 claimed that the country was in mortal danger from a growing Soviet threat. It argued that in just a few years the Soviet Union would be in a position to overrun Western Europe with conventional forces and obliterate the United States in a surprise atomic attack unless Congress and the president approved new massive defense expenditures. None of these projections about the potential Soviet power had anything to do with reality and most of it was simply made up out of thin air…..

NSC-68 served as a seminal document in the making of US foreign policy. It essentially changed America’s role in the world forever by justifying its transformation into a permanent big-government war state and imperial power. Still, it remained secret from the American people until it became declassified in the 1970s. When the Russians saw it, they could barely believe its exaggerations….

By the end of the 1950s, the transformation of the United States into a war state that began after World War II and was codified in NSC-68 was complete. The United States was formed as a continental democratic republic, but emerged out of the war as a war state with a world empire. As a result power that had once been in the hands of the states and congress flowed into the executive branch of the government. The defense industry generated more profits and the bureaucrats tied to the war state gained more power and influence inside the federal government. Corporate and state power became centralized together in an iron triangle of influence. In 1961, President Dwight Eisenhower gave a farewell address to the nation in which he warned of the power of the “military-industrial complex.”…

Today the military-industrial complex is more powerful than ever and the war state has become a bloated fiscal nightmare intent to engage in seemingly endless and unwinnable wars until the end of time — all on the basis of supposed threats that are even bigger exaggerations than the Soviet threat was ever portrayed to be during the Cold War….

This is a history that very few people know anything about. I wrote this book in the hopes that others would come to know it.

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Michael Swanson resides in rural Virginia. He received a Masters Degree in history from the University of Virginia and then dropped out of the college’s Ph.D. program to enter the business world. He ran a hedge fund from 2003 until 2006 and runs the website Wallstreetwindow.com.

Reading List

Prepared by Richard M. Ebeling

Austrian economics is a distinctive approach to the discipline of economics that analyzes market forces without ever losing sight of the logic of individual human action. Two of the major Austrian economists in the 20th century have been Friedrich A. Hayek, who won the Nobel Prize in Economics, and Ludwig von Mises. Posted below is an Austrian Economics reading list prepared by Richard M. Ebeling, economics professor at Northwood University in Midland and former president of the Foundation for Economic Education and vice president of academic affairs at FFF.